FDA Clears BlueSkys Versatile 1 Wound Vacuum System for Marketing, Medicare Confirms Coding

The FDA has Cleared BlueSky Versatile 1 System for marketing and the Centers for Medicaid Services has confirmed reimbursement Coding. BlueSky is the number two company in this dynamic rapidly growing 800 million dollar market and feels this decision will help increase market share.

La Costa, CA November 11, 2004 -- The Food and Drug Administration cleared the BlueSky Versatile 1 Wound Vacuum System (V1 WVS) for marketing recently and Medicare confirmed coding decisions made to Versatile 1 products. The BlueSky Wound Vacuum applies localized negative pressure to the wound bed to promote the healing of wounds. Localized negative pressure has been used to heal wounds for years and was reintroduced with flexible membrane technology in 1980's by Katherine Jeter, D.Ed, ET, . Our concept follows the teachings of Dr. Jeter and Dr. Mark Chariker. The FDA cleared the Chariker-Jeter Vacuum Sealing Kit as part of the BlueSky WVS approach. The FDA allowed the indication for use of may promote wound healing after review of BlueSkys application, which included the Chariker-Jeter Study published in 1989, and several case studies based on this approach.

The Centers for Medicare and Medicaid services recently approved the reimbursement of the Versatile 1 Pump and the Chariker-Jeter Accessory kits for reimbursement. BlueSky, the number two company in the Negative Pressure Therapy field, continues to make progress in a number of areas. The approval of BlueSky for these codes means that our dealer base may use the assigned codes for Medicare reimbursement purposes. While the codes may not be the final ones assigned to us, we feel this is a significant step that CMS has realized the value of our products.

Additionally, Anthem BlueCross a major insurance carrier in the United States has rewritten its reimbursement policy to Include the Versatile 1 pump as a covered product under its Negative Pressure Wound Therapy in the Home Environment policy. More and more state Medicaid programs are considering covering the Versatile 1 Wound Vacuum System. For instance Illinois Medicaid issued a written policy decision. This adds to the growing list of private and public entities that are covering the BlueSky Product. Richard Weston, President, states that each of these coverage decisions require extensive documentation and also generally do require trials with the products before authorizing coverage.

This FDA and Medicare decisions will positively effect our market position (current #2) and increase our market share from the 1-5% that it currently holds in the Negative Pressure Therapy. The Negative Pressure Therapy market is a 800 million Dollar market that will grow to 1-2 Billion dollars in the next few years. The clearance by the FDA for marketing additional indications for use along with the increased options for reimbursement make the BlueSky Versatile 1 Wound Vacuum System even more viable for our account base.

The FDA and Medicare decisions also may strengthen BlueSky's legal position. Kinetic Concepts Inc. and Wake Forest University sued BlueSky Medical Group Inc. et. al. in US Federal court on Sept 8, 2003 on numerous counts including patent infringement (US District Court Western District of Texas Case# SA-03-CA-0832-RF). We believe that the courts may interpret the decision of the Food and Drug administration an agency of the United States government that is charged with safety and efficacy of medical devices with some weight in this patent dispute. We have requested the court invalidate these patents and feel the court will rule in our favor.

###